Because corporate tax rate reductions are not targeted at businesses undertaking new investments or creating new jobs, they are largely ineffective at creating jobs, the report from the NC Budget & Tax Center says. Also, because cutting taxes undermines public investments – investments that attract businesses – the move could well be counterproductive.

“Corporations benefit from public structures—schools, universities and community colleges, roads, courts—and therefore it makes sense to they contribute to their maintenance and improvement,” writes Alexandra Forter Sirota, BTC director and the report's author.. “Increasing evidence is available to suggest that it is, in fact, these public structures that greatly influence businesses decisions about where to locate and expand their operations.”

In her State of the State address, Gov. Perdue proposed cutting the corporate tax rate by 2 percentage points from 6.9 to 4.9 percent. This 29 percent cut in the corporate income tax would result in just a 2.2 percent cut in overall business taxation and only a 0.04 percent reduction in total business costs.

Besides, these types of across-the-board cuts do not generate the kind of new economic activity that is needed to create more jobs, Sirota writes. More targeted, evidence-based policies are necessary to encourage new hiring.

“In the short term, cutting corporate taxes is unlikely to create new jobs,” said Sirota. “Over the long term, these tax cuts would undermine critical public structures that are crucial to North Carolina's future prosperity.”